Experts: Wages in China to continue rising

16:13, September 27, 2010      

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The pace of Chinese wage increases is expected to accelerate over the next five years, said scholars at Renmin University of China. Thanks to the consistently accelerated urbanization, further industrialization and institutional reforms, there have been increases in compensatory and reservation wages as well as a synchronized rise in wages and productivity. These factors will result in a relatively rapid wage growth in China in a medium-term period.

According to the "China's Macroeconomic Analysis and Forecast Report (Third Quarter of 2010)" recently released by Renmin University and Donghai Securities Company, the wage formation mechanism in China's low-end labor market is transforming from following the traditional living wage-based pricing rules to following the negotiated pricing rules subject to reservation wage.

The report estimates that despite the continual growth in the efficiency of China's labor market, a continual drop in the proportion of residents' disposable income to gross national income and China's relatively high foreign trade reliance, the accelerated wage rise will neither affect China's general competitive edge nor bring about inflationary pressure in the near future.

According to the report's analysis, the reform of the wage formation mechanism has a strategic significance to the adjustment of China's economic structure. First, there will be in-depth changes in the employer-employee relationship, which will accordingly result in the changes in the income distribution structure, provide new possibilities to narrow the overly wide income gap and promote the transformation of the Chinese economic growth pattern from an economy propped up by foreign demand to one driven by domestic demand and investment.

Labor cost increases will help to resolve a variety of current in-depth structural difficulties, according to the report. The reform of the wage formation mechanism will fundamentally change both employer-employee relations and the situation that the pace of wage increases has lagged far behind that of national income, resulting in revolutionary changes in the primary distribution of China's national income.

Furthermore, the wage increase in the low-end labor market will pose varied impacts on China's different regions, and the labor cost differences in various types of traditional industries will accelerate the "gradient shift" of such industries to China's central and western regions and leave room for industrial upgrades in eastern China.

Furthermore, there will also be changes in the relations between urban workers and farmers as well as between rural and urban areas. The changes in factor price ratios among all factors will advance the upgrade of the industry structure. China will enter a period in which the investment in human resources will accelerate.

According to the report, the rapid wage rise will fundamentally change the ratios among China's various factor prices, causing market players to spontaneously make substitutions among various factors, apply technology and capital-intensive production modes and enhance their independent research and development and technological improvement abilities to raise their core competitiveness.

By People's Daily Online


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